By Udeme Clement
REACTIONS IN BRIEF
More reactions from financial analysts and economists are trailing the recent devaluation of the naira by the Central Bank of Nigeria (CBN), following announcement by the apex bank for a new dollar-naira mid-rate of N155 and the extension of the band around the naira, allowing it to trade within N150 – N160 to the dollar range while leaving all other rates unchanged.

While some analysts said the new development will remove imbalance from the system by creating greater equilibrium to reduce volatility with the possibility of making the stock cheaper for the foreign investors to determine their returns, others said it will make importation of goods much more expensive since Nigeria is import dependent.

Experts who spoke with Sunday Business expressed their views:

It will reduce the rate of foreign exchange risk— Mr. Silas Igwe, an entrepreneur:  Though most people may not like the idea, but the reality is that devaluation of naira by this time has the tendency to reduce the rate of foreign exchange risk. For instance, the investors will be able to calculate their returns easily since the currency will be stable.  It will create greater equilibrium to remove imbalance from the system by reducing volatility.  Also, there is the possibility of making the stock cheaper for the foreign investors to know their returns.

My only worry is the fact that Nigeria ’s economy is import-dependent. This implies that devaluation of the naira will make imports much more expensive, thereby creating inflation in the economy. Beyond that, I believe the monetary authority is trying to look inward in order to boost the growth of the manufacturing industry. This is because devaluing the currency will encourage local manufacturers to increase their production capacity since locally made goods will become cheaper than the imported products.

A consuming nation like Nigeria should not devalue her currency because it would amount to inflation and impoverishing the citizens— The registrar, International Logistics and Administration, Mr. Mark Iloh:

The word devaluation means the reduction of the value of a country’s currency in terms of the value of the currencies of other nations of the world. Therefore, the effects of devaluation are:

Exports Become Cheaper- The prices of goods produced locally would fall in other countries because people from other countries would use lesser amount in buying goods from such countries that devalued. Import Becomes Much More Expensive- Citizens from a country that devalued her currency would spend more in buying goods from other countries. Increase In Exports-Exports in a country that devalued its currency would increase because they are cheaper. Reduction In Imports-The quantity of goods and services that would be imported into a country that devalued its currency would reduce because they are more expensive in terms of buying them due to low purchasing power.

Improvement in the Balance of Payments-This is as a result of increase in quantity of goods exported and reduction in imports which leads to saving foreign exchange for the country. Nigeria at this time could not afford to devalue her currency because the country is not producing a product that would attract buyers from other countries. The little quantity of goods we are exporting apart from crude are in raw-materials which would later be transformed by the developed world and sent back to us as imported goods with higher value (prices).

Naira devaluation at this period may not help the economy: The registrar, Nigerian Institute of Animal Science (NIAS) Abuja , Dr. Godwin Oyedele Oyediji, also former chairman, Agriculture, Non-oil Export Trade Group, Lagos Chambers of Commerce, Industry, Mines and Agriculture (LACCIMA)- It would be recalled that in the third quarter of year, the International Monetary Fund (IMF) suggested that the apex bank should increase the Monetary Policy Rate (MPR) to curb rising inflation and weaken the naira, in order to reduce the rate of public spending, which increased from 10 per cent in the previous year to about 37 per cent in 2010. Now the CBN has devalued the currency. The management of the apex bank should be careful not to allow IMF control the monetary policies of our economy.

IMF made similar suggestion during the administration of Ibrahim Babangida, and the outcome was a disaster for Nigeria . The idea brought about a huge damage with negative consequences to the country and up till now, the economy has not fully recovered from that policy. CBN should focus more on the reforms that will enhance economic growth within the short, medium and long term expectations. This will boost industrial growth in order to address the problem of unemployment in the economy.